Should I Start an LLC for My Small Business?

Updated December 2025

Starting A Small Business LLC

As a small business owner, you want all the flexibility, tax advantages, and personal protection you can get. Fortunately, forming a Limited Liability Company, also known as a Limited Liability Corporation (LLC) can give you all three of these benefits and more.

At Landmark National Bank, our business banking experts are here to guide you through the process of forming an LLC and understanding what it can do for your business. Below, you will discover exactly what forming an LLC means, LLC advantages, disadvantages, as well as how a small business owner can apply for one.

What is an LLC and What Does “LLC” stand for?

The acronym “LLC” stands for the phrase “Limited Liability Company,” or “Limited Liability Corporation.” Forming an LLC is an easy and inexpensive way to structure your small business. Many business owners choose an LLC for the flexibility they provide, the personal liability protection, and pass-through treatment of income for tax purposes.

Simply put, establishing an LLC can protect your personal assets if your business is sued, and it allows the profits (or losses) of your business to be taxed at your personal tax rate.

LLC Qualifications: Who Qualifies?

LLCs can be formed by any person starting a business or currently running a business as a sole proprietorship or within a partnership. 

LLC Advantages

Forming an LLC for your small business provides you with many real-world advantages, including:

Protecting Your Assets

The phrase “limited liability” refers to the individual protection an LLC provides to you as an owner. An LLC provides small business owners with a safety net by limiting their personal liability should anything go wrong. This means that the assets of the business itself are liable in the event of business-related lawsuits, liens, or debts. But the business owner’s personal assets are protected and not liable to seizure. 

Due to the lack of personal liability, creditors or individuals who file lawsuits against an LLC can’t collect against personal assets like your personal vehicle, personal bank account, or primary residence. They are strictly limited to collecting from your LLC’s assets.

Note: The personal liability protection of an LLC does not cover illegal acts committed by an LLC owner.

How are LLCs taxed

Forming an LLC provides small business owners with pass-through taxation perks. This means that profits associated with the business are reported on personal income tax returns and taxed at personal tax rates. It’s important to note that LLC owners may also qualify for a special pass-through tax deduction generated by the Tax Cuts and Jobs Act. This income tax deduction could allow LLC owners to deduct up to 20% of the net business income earned each year.

While standard LLCs typically provide pass-through taxation, filing an election through the IRS allows them to be taxed like an S Corporation or a C Corporation. With C Corporation taxation elected, an LLC pays taxes on the business profits at the corporate tax rate of 21%. With S Corporation taxation elected, the LLC remains a pass-through entity, but it is not subject to Social Security or Medicare taxes.

Ease of Use and Adaptability

LLCs are the most basic business entity to establish and operate, and they provide enormous adaptability for different business-related circumstances. For example, LLCs do not place limits on the number of owners (or members) a business can have. Additionally, LLCs can be managed by any owner or member of the business, and they provide the option to designate specific managers, too. Compared with C-corps or S-corps, LLCs are easier to set up, manage and keep in good legal standing. 

Trustworthiness

One of the biggest benefits of forming an LLC is creating a sense of trust with your customers. Along with having an official business name to use, your LLC will help to reassure your clients of your business’s credibility.

Disadvantages of Forming an LLC

While forming an LLC offers many important advantages for small business owners, it’s also important to understand the potential drawbacks. 

Common disadvantages to forming your LLC:

Formation and Ongoing Costs

Although LLCs are generally affordable to establish, they do come with startup and ongoing expenses that sole proprietorships and informal partnerships often avoid. Filing fees vary by state but for startups operating on tight budgets, these costs may feel burdensome in the early stages of business.

Self-Employment Taxes

By default, LLC profits are taxed as personal income through pass-through taxation. While this avoids corporate income tax, LLC owners are typically subject to self-employment taxes, which include Social Security and Medicare.

This means LLC owners often pay higher payroll-related taxes compared to owners of S corporations, who may be able to reduce self-employment tax exposure by paying themselves a salary plus distributions.

Limited Growth and Investment Options

LLCs can face limitations when it comes to raising capital or attracting investors. Most venture capital firms and institutional investors prefer to invest in C corporations because of stock structures and scalability. If your long-term goals include rapid growth, public investment, or large-scale funding, an LLC may not always be the most strategic option.

Before making a final decision, it’s wise to consult with a legal professional, a tax advisor, and a trusted business banking partner

At Landmark National Bank, our business bankers are here to help you choose the right business structure to align with your goals.

How to Create an LLC for Your Business

Forming an LLC for your business is a straightforward process, but it’s important to remember that each state has its own set of LLC requirements. In general, establishing an LLC is a multi-step process that includes:

Selecting a Business Name: Do I Need To Include LLC in My Business Name?

When forming a Limited Liability Corporation, your business’s name must be unique in the state you plan to do business in. When filing for your LLC, your state will let you know if your business’s name is available for use. Additionally, your business must adhere to your state’s LLC naming conventions, which generally means your business’s name must also include “LLC” in the title. 

Writing and Filing Articles of Organization

While this name may vary from state to state, Articles of Organization allow you to establish your LLC in your state. These articles typically require you to fill out general information about your business, including your LLC’s name, address, and the names of the owners or members of the business. In some states, each member of an LLC must sign the Articles of Organization, but others only require one member’s or owner’s signature.

Designating a Registered Agent

Many states require you to designate a registered agent to form an LLC. This agent is the business owner or member that represents the LLC and receives any legal paperwork in the event of a lawsuit.

Paying Required LLC Fees

LLC fees vary from state to state. Typically, these fees can range anywhere from $100 to several hundreds of dollars.

Publishing a Notice of Intent

If you live in Arizona, Nebraska, or New York, you are required to publish a legal notice of intent in a local newspaper. These states may also require you to publish your notice of intent several times over the course of weeks or months, as well as file an affidavit of publication with the state.

The Importance of Creating an LLC Operating Agreement

If your business has multiple owners, it is critical to create an LLC operating agreement—even if it is not required by your state. This document details the rights and responsibilities of each owner, which provides a general framework to help deal with business conflicts or transfers of ownership. While your operating agreement can be as detailed as you need it to be, it should specify things like voting power, percentages of ownership in the business, and more.

How to Form an LLC in Kansas

If you’re planning on forming an LLC in Kansas, Kansas Business One Stop is your go-to solution for starting and maintaining a business. No matter if you’re just getting your startup off the ground or your business is expanding, this convenient government resource provides you with information on structuring, operating, and growing your business—as well as quick access to important documents you will need when forming your LLC.

Manage Your LLC’s Finances with Help from Landmark

The LLC advantages range from giving your small business credibility to helping you protect your personal assets and gain tax breaks. 

Once you have your LLC established, you need a business banking partner who knows your business. At Landmark National Bank, we’re committed to connection and building personal partnerships with our clients so we know their goals and can help them reach the next level. Check out our suite of business banking services to help manage your business along with unique tools like online cash management, merchant card services, business credit cards, and more so you can get all the solutions you need under one roof.

If you’re ready to build a banking partnership that lasts, reach out to one of our business banking experts, or find a branch near you.